Italy economy minister expects change in output gap measurement
ROME (Reuters) - European finance ministers are moving towards revising one of the key economic benchmarks that will determine the size of a possible correction to Italy's 2015 budget plans, Economy Minister Pier Carlo Padoan said on Thursday.
The very technical issue, regarding the so-called "output gap", could have a significant influence on budgetary policy because it helps define the budget position in structural terms,
adjusted for swings in the business cycle.
Padoan said that the European Commission, which is due to pass judgement on EU member states' budget plans on Friday, was using outdated statistical measures.
"After three years of prolonged recession, the measures taken from a statistical method that belongs to the past should be revised," he told parliament.
He said there was growing awareness among euro zone finance ministers that calculations of the output gap, the difference between a country's real and potential economic output, needed to be overhauled.
"So there are moves in Europe to revise these measures, first at a technical level and then at the political level," he said.
Italian officials believe the European Commission underestimates Italy's potential level of economic output, meaning the structural deficit measured by Brussels is wider than it would be using another measurement.
Padoan said the Commission's standards for measuring the output gap did not adequately reflect Italy's true position.
Italy expects to meet the EU's official deficit target of not more than 3 percent of gross domestic product next year, but it is under pressure to lower its structural budget deficit.
Rome is proposing to cut the structural deficit by 0.3 percent of gross domestic product next year, compared with a 0.7 percent cut originally requested by Brussels.
On the output gap, Padoan noted, in an interview with the Financial Times this month, that the Commission has estimated the gap at 3.5 percent of GDP this year, compared with an estimate of 5.1 percent by the Organisation for Economic Cooperation and Development.
Last week, a Commission spokeswoman said she was not aware of any immediate plans to revise the methodology.
(Reporting by Giuseppe Fonte, writing by James Mackenzie; Editing by Susan Fenton)
